Star City is considering an investment in the community center that is expected to return the following cash flows: Use Exhibit A.8.
Year Net Cash Flow 1 $ 34,000 2 64,000 3 94,000 4 94,000 5 114,000
This schedule includes all cash inflows from the project, which will also require an immediate $214,000 cash outlay. The city is tax-exempt; therefore, taxes need not be considered.
a. What is the net present value of the project if the appropriate discount rate is 24 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.)
b. What is the net present value of the project if the appropriate discount rate is 14 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.)
Star City is considering an investment in the community center that is expected to return the following cash flows: Use Exhibit A.8.
| Year | Net Cash Flow | ||
| 1 | $ | 34,000 | |
| 2 | 64,000 | ||
| 3 | 94,000 | ||
| 4 | 94,000 | ||
| 5 | 114,000 | ||
This schedule includes all cash inflows from the project, which will also require an immediate $214,000 cash outlay. The city is tax-exempt; therefore, taxes need not be considered.
a. What is the net present value of the project if the appropriate discount rate is 24 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.)
b. What is the net present value of the project if the appropriate discount rate is 14 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.)
Related questions
Star City is considering an investment in the community center that is expected to return the following cash flows: Use Exhibit A.8.
| Year | Net Cash Flow | ||
| 1 | $ | 29,000 | |
| 2 | 59,000 | ||
| 3 | 89,000 | ||
| 4 | 89,000 | ||
| 5 | 109,000 | ||
This schedule includes all cash inflows from the project, which will also require an immediate $209,000 cash outlay. The city is tax-exempt; therefore, taxes need not be considered.
Required:
a. What is the net present value of the project if the appropriate discount rate is 24 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.)
b. What is the net present value of the project if the appropriate discount rate is 14 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.)
Sharp Company has $35,000 to invest. The company is trying todecide between two alternative uses of the funds as follows: |
| Invest in Project A | Invest in Project B | |||
| Investmentrequired | $ | 35,000 | $ | 35,000 |
| Annual cashinflows | $ | 6,500 | $ | 0 |
| Single cash inflowat the end of 10 years | $ | 39,000 | ||
| Life of theproject | 10years | 10years | ||
| Sharp Company uses a 8% discountrate. (Ignore income taxes.) |
Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determinethe appropriate discount factor(s) using tables. |
| Required: |
| a. | Determine the net present value. (Negative amountsshould be indicated by a minus sign. Round discount factor(s) to 3decimal places, other intermediate calculations and final answersto the nearest whole dollar.) |
| Net PresentValue | |
| Project A | $ |
| Project B | $ |
| b. | Which investment would yourecommend that the company accept? | ||||
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5) Citrus Company is considering a project that has estimated annual net cash flows of $23,430 for four years and is estimated to cost $110,000. CitrusΓ’ΒΒs cost of capital is 6 percent.
Determine the net present value of the project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round your final answer to 2 decimal places.)
6) Vaughn Company has the following information about a potential capital investment:
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